South Korea to Introduce Blockchain-Based Deposit Tokens for Government Expenditure in Q4

The South Korean Ministry of Economy and Finance is set to launch a pilot program in the fourth quarter to test the use of blockchain-based deposit tokens for government expenditure as part of a larger effort to modernize public fund management. According to local media reports, the pilot program, which involves using digital currency to disburse Treasury funds, has been approved under the 2026 regulatory sandbox initiative. This approval enables the use of tokenized deposits to cover business promotion expenses, which are currently processed using government-issued purchasing cards. By doing so, the government is deviating from the traditional system governed by the Treasury Funds Management Act, which mandated the use of card-based payments. Within the sandbox environment, government agencies will be allowed to operate outside these rules on a limited basis to test innovative methods. Officials anticipate that this shift will enhance oversight, as token-based payments can be programmed with predefined conditions such as spending limits and restrictions on eligible industries. This could lead to a reduction in manual audits, particularly when spending occurs outside regular hours. Furthermore, the system eliminates intermediaries like card networks, which, according to the ministry, could result in lower transaction fees for small businesses receiving government payments. This marks the second instance of deposit tokens being used in Treasury operations, following an earlier pilot program related to subsidies for electric vehicle-charging infrastructure. The trial is scheduled to take place in Sejong City after a selection process for participating firms, and the ministry plans to expand the program if it demonstrates improved control over spending and yields measurable cost savings.